Wage and Hour
Employees can face a number of wage and hour issues. Here are some common problems:
- Independent Contractor versus Employee
In today’s “gig economy,” many people are currently working as “independent contractors” for several companies (e.g., Uber, Lyft, TaskRabbit, etc.). Independent contractors are self-employed and are not covered by employment, labor, and certain tax laws. Some employers, however, may be tempted to reclassify employees as independent contractors to avoid paying taxes or other liability. Determining whether someone is an employee or independent contractor is very fact-specific and depends on the working relationship between the employer and the individual. Call us to see if we can help.
- Overtime Violations
The Fair Labor Standards Act (“FLSA”) requires employers to pay one and a half times an employee’s regular hourly rate for all hours worked over 40 in a given week. There are several exemptions from the FLSA’s overtime requirement, and it’s the employer’s burden to show that a particular employee fits within one of these exemptions. Here are the most common exemptions:
- Administrative: The employee’s primary duty must be (1) the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (2) the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
- Executive: The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; (2) the employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and (3) the employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
- Learned Professional: The employee’s primary duty must be (1) the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; (2) the advanced knowledge must be in a field of science or learning; and (3) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
- Creative Professional: The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
In addition to meeting the requirements listed above, an exempt employee must be paid on a salary basis and must be paid at least $455 per week. The Department of Labor has recently issued a new rule effective December 1, 2016 that will increase the salary threshold from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). According to the DOL, this change will impact 4.2 million workers across the United States.
There are several exemptions in addition to those listed above that cover sales employees, computer workers, and highly compensated employees. Deciding how to classify workers can be tricky for employers, and they often get it wrong. Call us to determine whether you should be receiving overtime under the FLSA.
- Tipped Employees
The Fair Labor Standards Act allows employers to take a credit toward the hourly minimum wage payment for a “tipped employee” if the employer meets certain requirements. A tipped employee is any employee who receives $30 or more per month in tips. The employer also has to tell the employee (verbally or in writing) the following:
- The amount of the cash wage the employer will pay to the tipped employee (must be at least $2.13/hour);
- The additional amount claimed by the employer as a tip credit (must not be more than $5.12/hour – the difference between the cash wage and $7.25, the current minimum wage);
- That the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
- That all the tips the employee earns are his or hers to keep unless the employee is part of a valid tip pool; and
- That the tip credit will not apply to any tipped employee unless the employee has been told about these provisions.
Common areas of concern for service industry employees include invalid tip pools and calculation of overtime based on the full cash minimum wage (instead of the tipped wage). Contact us if you have questions.